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Investors and readers are probably aware of production snags that have delayed two next-generation airplanes, Airbus' A380 Superjumbo and Boeing's 787 Dreamliner. But now there's word of production delays for two existing aircraft, Airbus's A330 and Boeing's 777.
A shortage of seats, toilets, and galleys is slowing down A330 and 777 assembly lines, The Wall Street Journal reported Friday (subscription required). Managers at the world's two rival commercial aviation giants suggest the snags could affect this year's financial results, but neither company has issued an earnings warning.
Shares of Boeing (NYSE: BA) gained $1.87 to $66.56, while shares of Airbus' parent EADS rose 1.27 euros to 14.85 euros on the Paris Exchange, in Friday afternoon trading.
Contractor ramp-up issues
For Boeing and Airbus, the crux of the problem stems from the relatively small size of the contractors producing equipment such as jetliner galleys, toilets and business-class seats, The Journal reported. Stock Analyst C. Leonard Bauer told BloggingStocks Friday the problem Boeing and Airbus face is "an upside problem," but a problem nonetheless.
"It's called the problem of success. Jetliner orders and deliveries have risen more than 40% in five years and contractors are straining to keep up," Bauer said. "It had to happen sooner or later, because it's hard for contractors to in some cases double production of a part in two or three years." Bauer added that he does not have a rating on nor own shares in Boeing or Airbus.
The corrective tonic? In Boeing's case, Bauer said remedies will most likely include Boeing re-directing engineers, supply-chain specialists and others for temporary assignments in contractors' operations.
"It can get down to Boeing saying 'how many order and assembly specialists do you need to assemble 50 first-class lavatories in three months?' " Bauer said. "Boeing and the contractors will work out the cost changes later. The important thing is to avoid totally unacceptable delivery delays. You can't have the delivery of an otherwise flight-ready 777 delayed for two or more months because it lacks two specialized lavatories and 50 business-class seats."
Global battle
United States-based Boeing and European Union-based Airbus are engaged in a global contest for both market share and to determine which air travel model will best meet the needs of air travelers in the initial decades of the 21st century.
Boeing argues that point-to-point, fast, creature-comfort-filled air travel characterized by the next-generation 787 Dreamliner, will be the era's defining air travel flight. Conversely, Airbus argues that superjumbo A380 air travel, which features lower ticket prices, larger seating capacity and longer ranges, will be the flight most preferred by airlines and air travelers.
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Reader Comments (Page 1 of 1)
8-08-2008 @ 10:12PM
Jack said...
So that means the A380 and 787 will be further delayed. So that means higher costs for air flights and more oil wasted.
8-09-2008 @ 8:20PM
Tony Everitt said...
And Boeing`s Sydney-based Ken Morten said last week that the manufacturer expects global air travellers to increase an average 4% pa over the long-term, despite rising oil prices. Here`s a wild thought - maybe both Boeing and Airbus are right, and there will be sufficient demand for both models depending on local circumstances? Travel is such a resilient industry we can have winner and winners. My question is - are we such a hot growth prospect that there is need for even a 3rd model that`s not being pushed yet? See "Smell the Roses" on Tony`s Blog for more.
http://south-pacific.travel/blog